Introduction/Purpose:

This study examined the relationship between profitability and the age of microenterprises in Ecuador in the year 2021.

Methodology:

The relationship between the profitability and age variables was measured through a quantitative descriptive approach with cross-sectional data. An unsupervised learning technique called clustering was applied to a sample of 1,810 Ecuadorian microenterprises that have their financial statements registered with the Superintendency of Companies, Securities and Insurance during the study period.

Findings:

The results indicated a weak inverse relationship between profitability and age, and three clusters were identified using the K-medoids technique. Two clusters shared an average age of 9 years, but differed significantly in terms of profitability, averaging 1% and 55% respectively. The third cluster, composed of older micro-enterprises with an average age of 32 years, recorded an average profitability of 2%.

Conclusions:

It is concluded that profitability decreases with increasing age of the microenterprises, which is of interest for decision making in maturing enterprises because their expectations of the desired profitability and the level of strategies used by these companies may change.